No respite looks likely for domestic stocks on Monday, as most Asian markets traded cautiously amid concerns over high valuations. Both S&P500 futures and Singapore’s SGX Nifty traded in the red, signalling a negative bias.
Here’s breaking down the pre-market actions.
STATE OF THE MARKETS
SGX Nifty signals negative start
Nifty futures on the Singapore Exchange traded 18.5 points, or 0.16 per cent lower at 11,342.50, in signs that Dalal Street was headed for a negative start on Monday.
Nifty forms Bearish Engulfing candle
Nifty50 on Friday formed an indecisive candle on the daily scale with long upper wick, and a ‘Bearish Engulfing’ candle on the weekly scale. The index slipped below its 20-day exponential moving average (EMA), signalling further loss of momentum. Analysts said the index needs to stay above the 11,300 level to avoid a steep fall next week.
Asian shares fall on elevated valuations
Asian shares started Monday on the backfoot as investors grappled with sky-high valuations against the backdrop of a global economy in the grip of a deep coronavirus-induced recession while oil prices dropped sharply. Japan’s Nikkei was down 0.4 per cent ahead of a heavy week of macroeconomic data. Australian shares slipped 0.4 per cent while South Korea and New Zealand’s benchmark index were off 0.1 per cent each.
Oil prices drop after Saudi price cuts
Oil prices dropped more than $1 a barrel on Monday, hitting their lowest since July, after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months as optimism about demand recovery cooled amid the coronavirus pandemic. Brent crude was at $41.75 a barrel, down 91 cents or 2.1 per cent, after it earlier slid to $41.51, its lowest since July 30. US West Texas Intermediate crude skidded 91 cents, or 2.3 per cent, to $38.86 a barrel. Front-month prices initially hit a low of $38.55 a barrel, a level not seen since July 10.
US stocks settled lower on Friday
US stocks finished lower after choppy trading as investors continued to rotate out of tech-related shares.On Friday, the Dow Jones Industrial Average fell 159.42 points, or 0.56 per cent, to end at 28,133.31, after trading more than 600 points lower earlier in the session. The S&P 500 decreased 28.10 points, or 0.81 per cent, to 3,426.96. The Nasdaq Composite Index slid 144.97 points, or 1.27 per cent, to 11,313.13.
Happiest Minds IPO kicks off today
The Rs 702-crore initial public offer (IPO) by Happiest Minds will hit the Street on Monday. With services such as cloud and security and analytics accounting for 97 per cent of its revenues, the Bengaluru-headquartered company is more of a digital services company than legacy IT players, which have 35-50 per cent of their revenues coming from the segment. At the price band of 165-166 the issue is seeking a valuation for 26.76 times FY20 earnings per share. Analysts said that the valuations look high, but given the demand for midcap and smallcap IT stocks these days, risk-taking investors can consider subscribing to the IPO.
FIIs sell Rs 1,889 cr worth of stocks
Net-net, foreign portfolio investors (FPIs) were sellers of domestic stocks to the tune of Rs 1,888.78 crore, data available with NSE suggested. DIIs were net sellers to the tune of Rs 456.88 crore, data suggests.
Rupee: The Indian rupee rebounded by 33 paise to close at 73.14 against the US dollar on Friday, shrugging off tepid sentiment emanating from sell-offs in domestic equities and weak macroeconomic indicators.
10-year bonds: India 10-year bond yield rose 0.58 per cent to 5.93 after trading in 5.89-5.94 range
Call rates: The overnight call money rate weighted average stood at 3.42 per cent, according to RBI data. It moved in a range of 1.80-4.05 per cent.
DATA/EVENTS TO WATCH
- Japan Foreign Exchange Reserves AUG (05.20 am)
- China Balance of Trade AUG (08.30 am)
- Japan Leading Economic Index Prel JUL (10.30 am)
- China Foreign Exchange Reserves AUG (12.30 pm)
- UK Halifax House Price Index YoY AUG (01.00 pm)
Q2 may be a better show for Indic Inc… India Inc’s June 2020 quarter performance was much on the anticipated lines with revenue and net profit falling at the steepest rates in at least nine quarters. Analysts expect to see signs of a recovery starting from the September quarter as the country undergoes steady phases of returning to day-to-day affairs and as factories and business establishments gradually reach their pre-pandemic operating levels.
Govt okays $100b phone exports... Applications by iPhone contract makers Foxconn, Pegatron and Wistron as well as Samsung, Karbonn, Lava and Dixon to export mobile phones worth around $100 billion from India have been cleared by the empowered group, said people with knowledge of the matter. “The empowered committee has approved all applications estimated to export around $100 billion (₹7.3 lakh crore) worth mobile phones under the production linked incentive scheme (PLI) and all the applications will be placed before the cabinet probably this week,” a government official told ET.
Venture investments picking up… Early-stage venture investments have picked up significantly since July, after a relatively slow period of deal-making in the previous quarter, multiple investors told ET. The pandemic is throwing up opportunities for new digital businesses, prompting more entrepreneurs to enter the fray. Deal flow and the number of startup ideas a venture firm evaluates registered a 50%-plus uptick from the previous quarter, they funds ET spoke to said.
CLSA has a bleak view for India GDP… CLSA believes Covid-19 is likely to cost more than $600 billion to India’s gross domestic product (GDP) and over $135 billion on government finances. The estimate of a 15% YoY fall in India’s real GDP implies a more than $600 billion miss in FY21 nominal GDP. Loss of revenue plus Covid-19 economic package cost may impact combined state/central government FY21 finances by more than $135 billion, taking the FY21 fiscal deficit to 8% of GDP – about 12% including state deficits,” the brokerage said.
Raters in a soup over loan recast… As Corporate India and banks prepare to rejig loans and stay afloat, credit rating agencies are caught in a Catch-22 situation. In the absence of any regulatory direction, rating agencies are in a dilemma over downgrading a company which defaults before multiple banks finally agree on a one-time loan restructuring plan. It will take a few months before all banks in a lending consortium sign on the restructuring proposal — which could include a lower interest rate, longer repayment tenor, an initial moratorium period, and the extent of haircut banks have to take following the changed terms.
30% bars go out of business… More than 30% of restaurants and bars in India have shut permanently in the April-August period because of the lockdown, the National Restaurants Association of India said. On Thursday, Jubilant FoodWorks said it is shutting down 105 unprofitable dine-in stores
Voda offers extra toppings to investors… Vodafone Idea is considering credit enhancement to provide additional comfort to global investors as plain vanilla offerings may not attract interest in a company with debt of almost ₹1.7 lakh crore, people familiar with the matter said. This could be part of the debt-structuring options that the company chooses from, they said.
Maruti seeing major earnings upgrades… Maruti Suzuki is witnessing earnings upgrades driven by improving volume visibility after a gap of almost two years. The beginning of the earnings upgrade is an endorsement of the consensus opinion that overhang on earnings — on production as well as margins — has faded substantially. The stock has gained 26% in the past three months thanks to a massive rerating and investors’ increasing allocation to discretionary over staples.
EPFO to open up for individuals…. India could throw open its key social security scheme — the Employees’ Provident Fund to individuals, a top government official told ET. The move is expected to help the government expand social security coverage to more than 90% of workers not falling under any social security scheme at present.
Ind directors leave in droves… The exodus of independent directors from listed companies is swelling. As many as 1,344 independent directors resigned from companies listed on NSE in FY20 – that’s 45% more than a year earlier and an 80% increase from FY18, according to data from primeinfobase.com. ‘Personal reasons’ was the most common explanation for resigning. As many as 296 independent directors resigned, citing personal or health reasons, pre-occupations, conflict of interest, change of role, or disagreement. Another 184 independent directors did not offer themselves up for re-appointment after they retired or their term ended.
Delhi farmhouses on sale… The sprawling farmhouses in and around the National Capital are once again beckoning businessmen and executives looking for open spaces, tired of being confined to their high-rise penthouses during the lockdown. About two dozen transactions for such properties were closed in the past two months, compared with an average two to three deals a month before the Covid-19 outbreak. About 500 farmhouses are on sale — ranging from Rs 10 crore to Rs 150 crore — in areas such as Westend Greens, Sultanpur, Pushpanjali, Vasant Kunj, DLF Chhattarpur, Radhey Mohan Drive and Ansal Satbari, brokers and industry watchers said.
Credit: Stocks-Markets-Economic Times